Kazakh President Warns The 'Real Crisis Is Coming'

October 22, 2015 18:22 GMT

Bruce Pannier

A woman counts out several tenge banknotes while purchasing some dairy products at a market in Almaty. The declining value of the Kazakh currency has hit the country's economy hard and some believe the worst is yet to come.

When Kazakh President Nursultan Nazarbaev said on October 19 that a "real crisis is coming" to his country, it must have sent chills down the spines of Kazakhstan's people.

Many people in Kazakhstan are already in a crisis situation and for more than a year they have been listening to government officials downplay the severity of the economic problems, only to learn later that those problems were worse than they had been led to believe. And now the president says the "real" trouble is about to begin.

RFE/RL's Kazakh Service, known locally as Azattyq, has been reporting regularly on the worsening economic situation in Kazakhstan.

On October 20, Azattyq reported on Anar, a schoolteacher, who together with her husband, a driver in Almaty, is raising six children on a combined monthly budget of some 100,000 tenge.

"Our income is barely enough for daily meals, not to mention school supplies or clothing," Anar told Azattyq.

Less than two years ago, 100,000 tenge per month would have been an adequate amount of money, somewhere around $650. The government devalued the tenge to about 180 to $1 in February 2014. At the time the government promised there would be no second devaluation.

However, Kazakhstan's economy is dependent on oil exports. The falling price of oil hit Kazakhstan hard but Russia, one of Kazakhstan's leading trade partners, allowed its currency, the ruble, to fall and this also put strains on the tenge. Kazakhstan's government fended off the pressure on the tenge by staging currency interventions.

Kazakh President Nursultan Nazarbaev

But it became increasingly clear a second devaluation was inevitable, so it was not so surprising when the presidential election was moved forward from 2016 to April 2015. Many assumed Nazarbaev wanted to secure a fresh term in office before the full impact of economic difficulties hit the country.

In July, Kazakhstan's National Bank widened the trading corridor, allowing the tenge to slide a bit to as low as 198 to $1, but just a month later the anticipated second devaluation was implemented and the tenge fell to 255 to $1. Some Kazakh officials suggested the exchange rate would correct shortly and the tenge would strengthen. Instead it weakened and was 277 as of October 22. And now there is talk of a third devaluation being necessary.

Already Anar and her family have gone from making the equivalent of $650 to $350 a month. But since the government promised to hold down prices for basic goods, in theory the tenge's loss of value shouldn't have such a great impact on the ability to buy food using the national currency.

Suspicious Price Hikes

Azattyq spoke to merchants selling food and they all said their suppliers have raised the prices. According to these merchants, who requested their names not be used, before the second devaluation, sunflower oil was 300 tenge, now it costs about 440, rice went from 240 to 280, the average price of milk increased by 20 tenge, the price of sugar by 30 tenge.

One merchant who gave his first name, Gulsym, said, "We don't get milk from America. Sugar and rice we also produce ourselves in the country...I can't understand why these became more expensive."

On October 21, Adel Kaliev, a top official in the investigative department of Kazakhstan's antimonopoly agency, said the agency had also learned of suspicious hikes in prices for basic goods and would be hunting for violators.

Others in Kazakhstan are in a more desperate situation. They have recently lost their jobs as the country's enterprises lay off employees to cut costs.

Azattyq sent a request for information about job cuts to the Health and Social Development Ministry's Committee for Labor, Social Protection, and Migration. The committee provided some figures for the first nine months of 2015.Data showed that, in 381 businesses surveyed in Kazakhstan that employed more than 189,000 people, 5.8 percent of workers (11,039) were laid off. That is three times the number of workers laid off during the January-September period last year (3,663), according to the committee's figures.

And, of course, as President Nazarbaev just said, the real crisis is coming. At that same time he also told Prime Minister Karim Masimov that the government's Nurly Zhol (Bright Path) economic program included funds for retraining those out of work because of job cuts so they could find employment in other sectors.

No Vacancies

Almaty resident Gulbanu Orazalieva told Azattyq she had been working at a local bread factory for 10 years but was recently dismissed without any warning as the factory implemented cuts.

"If we had heard about the impending cuts a month ago, we would have started looking for other work," Orazalieva said. "I have four children, I have debt. How am I going to survive?" she asked.

Orazalieva said she could not even find work as a dishwasher at a cafe since those jobs were all going to younger women.

Bektur told Azattyq that he worked for 17 years at a local television station and even when he was laid off he was confident he would be able to find employment at another station.

"I have been [to all of the stations], and they tell me they are expecting to make cuts soon or don't have any vacancies. In the end I lost all hope that I would find a job in my field," Bektur said.

Timur Nazhanov, the chairman of the Almaty Independent Association of Entrepreneurs, said the country is already in an economic crisis. And he pointed to Russia as having contributed to Kazakhstan's economic woes.

"We are in the Eurasian Economic Union. That has complicated getting supplies of goods from Europe. Russia's goal is to defend its goods. Kazakhstan imports a large part of its goods. Russia increased the number of obstacles for imports to Kazakhstan…at the start of the year Russian goods arrived at a very low price, sales of products from our enterprises -- vehicles, agricultural goods -- weakened," Nazhanov explained.

And now, according to the president, the "real crisis" is about to hit.

Based on material from RFE/RL's Kazakh Service, with contributions from its reporter Yerzhan Karabek

Related

About This Blog

Qishloq Ovozi is a blog by RFE/RL Central Asia specialist Bruce Pannier that aims to look at the events that are shaping Central Asia and its respective countries, connect some of the dots to shed light on why those processes are occurring, and identify the agents of change. Content will draw on the extensive knowledge and contacts of RFE/RL's Central Asian services but also allow scholars in the West, particularly younger scholars who will be tomorrow’s experts on the region, opportunities to share their views on the evolving situation at this Eurasian crossroad. The name means "Village Voice" in Uzbek. But don't be fooled, Qishloq Ovozi is about all of Central Asia.